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April 2020

Apr 30, 2020

How are Law Firm’s Doing During COVID-19

Question: 

Our firm is a four lawyer estate planning firm in Bakersfield, California. As you know our state has been under stay at home orders for sometime. We have everyone except our receptionist and one attorney working remotely from their homes. We are doing much better than I expected. In fact we are getting new clients at close to our usual number per month and our fee collections have actually exceeded our normal monthly fee collections. How are other firms doing?

Response: 

It depends on practice area and firm size. Many of the very large firms are facing dramatic work slowdowns and are laying off attorneys and staff and or cutting partner, associate, and staff compensation. However, many small consumer facing practices such as estate planning/probate, general practice, family law, and personal injury advise us that they are doing well in terms of fee collections and new matter signups. Intellectual property firms also advise us that they are holding their own.

The biggest issues for many of these small firms have been:

Small firms that are “paperless” and are using cloud-based billing and practice management systems are having the easiest time of working remotely.

Don’t get too comfortable based on March and April’s numbers. I believe that May or June will provide you with a better glimpse of the future both in terms of new business and fee collections. There could have been initial client demand based on the need for people to get some things done in preparation for the virus lock-down and you could see in May or June client demand dropping off. Also keep in mind that some of your fee collections were based upon accounts receivable and prior unbilled work in process. In addition, some of the billable work for the past month or so was probably performed on matters or cases that you already had in the pipeline.

May or June may give us all a better picture.

Good luck!

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John W. Olmstead, MBA, Ph.D, CMC

 

Apr 16, 2020

Law Firm Planning During COVID-19

Question: 

I am the managing partner of a fourteen attorney business law transaction and litigation firm in St. Louis, Missouri. Our area is in lock-down as a result of COVID-19 and everyone in our firm except for our receptionist has been working remotely. We had planned on putting in place a strategic plan this year and completed a couple of initial meetings. As we move forward how do we plan in this environment or should we even try?

Response: 

These are definitely uncertain times and the legal profession will be facing an uncertain future. I believe that COVID-19 will leave a lasting imprint on the legal profession and will change and accelerate law firms into the digital age. This digital transformation will effect law firm clients, law firms, and the judicial system. Status quo will be altered permanently and new operating procedures will be developed. Entrenched legal service delivery methods will be abandoned. The following practices that we are seeing now will become commonplace:

Competition for legal talent will intensify and commodity work competitive will be greater than ever.

I believe that long range/strategic planning will be more important than ever but more difficult. However, right now everyone is in survival mode with a focus on the day to day. While these are unusual times with a very uncertain future, short and long-term planning will be more critical than ever. Right now I believe your focus should be on short-term tactical operational planning with three month planning horizons. The following are just a few of the topics that you should focus on:

You will need your short-term planning to be flexible as the current situation changes.

Once you have a handle on the short-term you can continue working on your strategic plan. I suggest that it initially be for a five year time period. You should incorporate some degree of scenario planning with different strategies for different future scenarios. While the future may be uncertain an uncertain plan is better than no plan at all.

Finally, if you have people in your firm that are casual users of technology I suggest that this is a good time to push them to get up to speed. Recently I was speaking with the partner of law firm that advised me that he wished he was more comfortable with technology and he is severely handicapped since his IT skills are limited to checking email and browsing the web.

Good luck!

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John W. Olmstead, MBA, Ph.D, CMC

 

 

Apr 08, 2020

Law Firm Succession and Exit Planning in the Era of Covid-19

Question: 

I am the owner of a general practice firm in the Southwest Suburbs of Chicago with four associates and four staff members. I am 66 and was planning on beginning to work on my retirement plan this year and approach two of my senior associates regarding acquiring my practice. I was hoping to retire and exit the practice two years from now. Now with the Covid-19 situation I am not sure what I should do. Is this a good time to even think about approaching my associates? While business is slow we are doing fairly well working remotely. I still want to retire and be done in two years. I would appreciate your thoughts.

Response: 

One thing is for certain, you will continue to age regardless of the virus and unless you needed higher income in your last year or two, your retirement goal and timeline has not changed. While I would not suggest approaching your associates for the next few months I believe you could begin some of the preparatory work. When I work with law firms on succession planning projects there is a sequence of work steps that take place that take time and often the process can take several months. For example:

  1. Initial call with owner or partners.
  2. Document request to law firm.
  3. Law firm collecting and gathering documents (financial and other) and sending to us.
  4. Financial and document reviews.
  5. Telephone with owner or partners.
  6. Telephone interviews with associate candidates that you are thinking of transitioning the practice.
  7. Preparation of opinion letter (valuation, approach, etc.)
  8. Telephone call with owner or partners re discussion of opinion letter and next steps.
  9. Preparation of proposal to be presented to associate candidates.
  10. Conferences calls.
  11. Presentation of proposal to associates.
  12. Execution of legal documents.

So as you can see there is a lot of pre-work that needs to be done before you even approach your associates. Slow times are a good time to work on non-billable administrative and management projects and unless you have changed your mind on your retirement and exit goals this might be a very good time to begin working on your succession and exit planning.

Since legal skill, client, and management transition takes times you don’t want to wait too long otherwise you may have to move your retirement timeout out further.

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John W. Olmstead, MBA, Ph.D, CMC

 

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